GVK Power and Infrastructure’s power division is likely to hurt company financials, if fuel shortage concerns are not addressed in ensuing quarters. The firm’s gas based plants did not record any revenues as there was no gas supply from KG basin and hence segment losses shot upto Rs 171.41 crore in Q4FY13.
In an interview with CNBC-TV18, Isaac George,director-finance at GVK said that due to unavailability of gas, the company will operate on alternate fuel for which it has installed equipment last year.
The has claimed full capacity charges from AP Transco with which it has signed power purchase agreement. Read This:Will sell stake in subsidiaries for right offer: GVK's CFO
The company has also filed a petition with the state power regulator for advising AP Transco to pay the full charges. GVK has deferred the recognition of revenues aggregating to Rs 236.9 crore
Below is the verbatim transcript of his interview on CNBC-TV18
Q: Could you just start by walking us through what happened in the power division this time? Also importantly what you can point to now as guidance for FY14 and what you think you could do for power?
A: The performance of power division has been disappointing. These were for factors beyond our control; with no gas being available for two of our projects I think the results had to be disappointing. We have three operating power plants, the first one operated at virtually 50 percent plant load factor (PLF) and the second and the third was a single digit PLF. This was purely as a result of gas not being available for these two projects. From the middle of February onwards both these plants, with a combined capacity of something like 664 megawatts (MW) has been shut down and we are not operating at all.
So, unless gas comes in we will not be in a position to operate. The government is trying its best to arrange for gas. We will have to wait patiently till the outcome of those discussions that are happening at the centre.
Q: You have deferred recognition of Rs 237 crore of revenues because of the dispute with AP Transco. Can you take us through why you choose to defer it and what happens to recognition going forward?
A: Basically, both the plants which did not get gas and which are shut down have the ability to fire alternative fuel, which is high speed diesel. In the earlier quarters, we had accounted for revenue based on availability declarations which is actually a part of the concession agreement. The concession agreement very clearly provides that we can declare availability and based on the availability declarations, the local state electricity board (SEB) pays you the fixed charges.
That was disputed by AP Transco and they did not pay us for the capacity charges based on availability declaration. They went ahead and paid us based on the actual generation. Since we had accounted for the first three quarters based on availability declaration, which was actually the right way under the power purchase agreement (PPA) but when we found that they were not paying us, we thought it prudent to reverse the transaction. So, the entire impact was felt in Q4. We reversed the entire transaction and the accounted revenue based on actual generation rather than basing it on availability declaration.
This decision has been taken by the management after consultations with the legal department and they were of the opinion that our claim would still be tenable even though we don't account it as a part of the revenue.
Q: What is going on with your real estate monetisation plan at Mumbai airport that seems to be getting continuously deferred?
A: We will be doing it anytime now. The last of the approvals have also come in, so we are all geared up. Hopefully you will get some good news before June 30 and let us hope it happens that way because all the hurdles are removed. Now it is only something that we will have to take forward.
Q: On the airport division it looks like both passenger and cargo traffic have actually slipped year on year. What do you think you can do in terms of upping revenues there?
A: I thought the airports performed relatively better. Mumbai airport had a fairly decent profit. Mumbai had a turnover of something like Rs 1,460 crore and a profit of Rs 154 crore for the whole year. There has been a tariff increase and that contributed to the increase in profits as far as Mumbai is concerned.
Bangalore airport also performed relatively well; Rs 611 crore of turnover and a net profit for the whole year of about Rs 118 crore. There has been a slight dip in traffic to the extent of about two percent in Bangalore. In Mumbai also there has been a slight dip but I am sure we will make it up this year. The numbers for the current year look fairly positive. We will continue to do well at both the airports.